by Timothy McQuiston Vermont Business Magazine Led by James Crook, the former CEO of IDX Systems, a group of investors is trying to save Burlington Labs, its 180 employees and its "critical" role in statewide opiate testing. The University of Vermont Health Network will also be a minor investor if the Green Mountain Care Board approves an emergency Certificate of Need and the new entity is able to purchase the facility. The GMBC will hold a hearing Wednesday on the CON. Supporters say the CON needs to be approved quickly in order for the testing lab to continue operating. Burlington Labs has been spending more than its been taking in, owes millions to its bank and is under a state punitive order because of how Medicaid payments have been reconciled. All told, it's on the hook for about $15 million it is unable to pay.
In a letter dated August 19 (see full letter below), DRM attorney Elizabeth Wohl wrote, "Because of the grave financial condition of Burlington Labs ... the proposed project -- the purchase of Burlington Labs assets by the Applicant -- must take place within the next 30 days. Otherwise investors in the Applicant will have to abandon the project due to the large amount of capital that will be required to keep the company operational and the very high level of financial risk that will follow from the company's continued operation."
Wohl wriote that, "Burlington Labs serves a critical need in Vermont's efforts to combat substance abuse, especially opiate addiction. Burlington Labs employs approximately 180 people in six states (of whom approximately 150 are Vermont residents), and operates walk-in patient service centers in Barre, Bennington, Burlington, Middlebury, Morrisville, Rutland, St Albans and Springfield. A location in White River Junction was planned for late 2016. This location likely will not open if the proposed transaction is not approved. In addition, Burlington Labs offers on-site collection services to treatment centers, sober houses and medical offices."
In an interview with VBM, spokesman Mike Noble agreed with Wohl's assessment on the crucial need for the lab and why UVMHN is participating: "We were approached (by the lead investors) and agree that it is important to keep the jobs and maintain the services."
He said the lab works directly with the UVM Medical Center and associated hospitals for inpatient testing of many sorts and the lab is vital to the statewide effort to combat the opiate addiction crisis.
Along with helping fund a new ownership group, Noble said UVMHN will have its CFO, Todd Keating, as a member of the new board. Crook has stated that Burlington Labs founder Michael Casarico will also serve on the new board.
Burlington Labs has negotiated a settlement with the Vermont Attorney General to resolve allegations relating to overstatement of Medicaid claims. Burlington Labs will pay $6.5 million in damages to the state. It also is in default under its senior bank loan with KeyBank NA, for a $2 million demand note and a nearly $3 million SBA guaranteed term loan. It also has overdue trade debt of $3.7 million.
Beginning in late June, James Crook provided a secured loan to Burlington Labs of $800,000 and has since advanced another $600,000, which Wohl states in her letter has been nearly all spent. Monthly expenses exceed revenues by about $400,000.
"If the Applicant is able to successfully complete the purchase of assets of Burlington Labs, the Applicant would guarantee payment of the $6,500,000 settlement amount due to the State of Vermont, refinance the defaulted $4,894,600 KeyBank loan, and assume the trade obligations of approximately $3,700,000. If the Applicant is not able to complete the purchase of Burlington Labs, the obligations mentioned above will go unpaid, the State of Vermont will owe the federal government approximately $1.3 million, the SBA will owe KeyBank 75% of the $2,894,600 term loan, all trade debt will be unpaid, and approximately 180 jobs will be lost'" Wohl writes.
She also notes that Burlington Labs has made it a practice of employing people in recovery, all of whom, upwards of 25 workers, will be out of a job.
The GMCB will meet in the Montpelier Room, at the Capitol Plaza, 100 State St, Montpelier, Vt. The meeting starts at 9 am and the CON hearing for Burlington Labs is scheduled for 3 pm.
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